A good Atlanta business lawyer will review the garnishment action to determine the proper course of action so that the innocent small business owner is not suddenly paying the debts of one of its employees. Just recently a Georgia small business owner called me because his company’s bank accounts had been seized for the debt of one of the business’ employees. The problem arose when the small business ignored the initial garnishment action. The employee claimed that he did not owe the money, so the business wrote the Judgment holder a letter claiming that the debt was wrong. When the Georgia small business did not file an official response to the garnishment action, the Judgment holder was able to bring an action against the Georgia small business itself for the money of its employee.

The recent case of TBF Fin. LLC v. Houston, A09A0380, 09 FCDR 2286 (07/17/09), is a good example of how a business lawyer can help someone who has suddenly been garnished. Because the rules relating to garnishment actions are very strict, the lawyer was able to argue that the Judgment holder did not take the proper notification steps required under the law, and, as a result, the garnishment action was dismissed.

Generally speaking, there is nothing wrong with this. If the name is
a good one, it could mean a great deal of money for the new business
from a marketing perspective. As long as the client follows three
simple rules.

A recent Georgia Court of Appeals case highlights for everyone three
important rules. In Yim v. J’s Fashion Accessories Inc. A09A1369.
As Mr. Benjamin Yim found out the hard way, if you do not properly use
your trade name, you will be held personally responsible for any
contracts you enter into. That is exactly what happened Mr. Yim.

Many Georgia small businesses that invest in new property or equipment may be able to write off most or all of these purchases on their 2009 returns. The new Act extends through 2009 the special 50 percent depreciation allowance, also known as bonus depreciation, and increased limits on the section 179 deduction. The Section 179 deduction is so named for the relevant section of the Internal Revenue Code. After 2009, Georgia businesses will only be able to recover these capital investments through annual depreciation deductions spread over several years. Until then, Georgia businesses are encouraged to make investments by enabling businesses to write the investments off more quickly.

Under the current Act, the bonus depreciation provision generally enables businesses to deduct half the cost of qualifying property in the year it is placed in service. The section 179 deduction enables Georgia small businesses to deduct up to $250,000 of the cost of machinery, equipment, vehicles, furniture and other qualifying property placed in service during 2009. Without the new law, the limit would have dropped to $133,000. The existing $25,000 limit still applies to sport utility vehicles. A special phase-out provision effectively targets the section 179 deduction to small businesses and generally eliminates it for most larger businesses.

Bonus depreciation and the section 179 deductions are claimed on IRS Form 4562.

In the Kitchen case, the parties had agreed that the employee would receive a 25% interest in the corporation’s subsidiaries as part of the compensation for his employment with the company. The material terms of the agreement were laid out in a letter that was signed by both parties, which further showed their agreement. The Georgia Court of Appeals in Kitchens found that the letter clearly described the material terms of the stock transfer by providing: (1) the employee would work for the corporation and its subsidiaries in a certain position; (2) that by a certain date, the employee would receive 25% of the corporation’s subsidiaries’ outstanding stock; and (3) a formula for calculating the employee’s “ownership equity.” Additionally, the Georgia Court of Appeals found that the rest of the letter provides enough additional detail on the agreement for it to be enforceable even though there may be some uncertainty as to other aspects of the agreement.

In the Kitchens case, it appears that the letter signed by both parties governed the relationship between the Georgia corporation and the employee. In the absence of this letter, there likely would have been a different result. This case illustrates that it is good practice for contracting parties to sign a contract which includes the basic terms of the agreement. This contract needs to include all of the important terms. The more detail the parties agree on and include in the contract, the less likely a dispute will arise later on.

A corporation, though considered to be a person under Georgia law, can only act through its agents, while a natural person can represent himself in court. A person representing a corporation in a Georgia court is clearly acting in a representative legal capacity, which worried the Georgia Supreme Court: “The qualifications of the individual "representing a corporation ... in court is one of vital judicial concern. Such person is clearly engaged in the practice of law in a representative capacity. Thus, it is clear that permitting a corporation to be represented by a layman in a court of record would constitute a major exception to the requirement that a legal representative be a licensed attorney who is subject to the authority of the courts of which he or she is an officer. Indeed, there appears to be no reason why the prohibition against legal representation by a layman in a court of record should not apply when the party represented is a corporation rather than a natural person.”

The Court also remained aware of its role as the governing body for the practice of law in Georgia, and rejected creating an exception to its rule that only a lawyer could represent another person in a court proceeding. This is because the practice law is a privilege and not an absolute right, which results in the responsibilities lawyers owe not only their clients, but also the courts. “To allow a corporation to maintain litigation and appear in court represented by corporate officers or agents only would lay open the gates to the practice of law for entry to those corporate officers or agents who have not been qualified to practice law and who are not amenable to the general discipline of the court.”

Courts looks to three principles when deciding whether a non-compete restriction is reasonable:

1) time duration;
2) territorial coverage; and
3) scope of activity.

There are no hard and fast rules for the three principles, so the validity of a non-compete provision will always comes down to a determination on the facts of each individual case. Courts are generally concerned with how broadly the non-compete provision restricts the employee’s actions. Below are some illustrations of when courts have chosen to enforce and to strike down covenants not to compete.

Reasonable and upheld by court: a non-compete provision where a 13-year shareholder of an accounting company was not allowed to perform “accounting services” in any capacity for two years in seven metro-Atlanta counties: Fulton, DeKalb, Clayton, Gwinnett, Cobb, Fayette and Douglas. (Habif, Arogeti & Wynne, P.C., 231 Ga. App. 289).

Unreasonable and struck down by court: covenant where a software maintenance and support technician was not allowed to provide software services for any product supplied by his former employer anywhere in the United States. (Am. Software United States v. Moore, 264 Ga. 480). In that case, the territorial limitation was found to be too restrictive.

Reasonable and upheld by court: covenant not to compete which restricted a surgeon from practicing medicine or surgery for 2 years in ten counties: Coweta, Fayette, Fulton, Heard, Merriwether, Carroll, Clayton, Spalding, Troup and Pike. However, the surgeon was allowed to continue treating patients from his time with the restrictive employer so long as treatment was not done in the ten specified counties. (McAlpin v. Coweta Fayette Surgical Assocs. P.C., 217 Ga. App. 669).

Keep in mind that the courts in these cases upheld or struck down a covenant not to compete based on the specific facts of the case presented. For a detailed assessment of the enforceability of your restrictive covenant, be sure to meet with an experienced business lawyer.

1) Deadlines are extremely important: The party that has been sued, commonly referred to as the Defendant, will be served with a Complaint which contains the facts and allegations that form the basis of the lawsuit. Once a Georgia business has been served with a lawsuit, it is important to keep timeframes in mind. Generally, the Defendant has 30 days to file an Answer to the Complaint from the date when the Defendant actually received the Complaint. This deadline can be shorter depending on the court involved or the type of lawsuit that was filed. The Complaint will be accompanied by a Summons form, which should directly specify the number of days that the Defendant has to file an Answer. Though the Answer is typically the first deadline that a Defendant should be concerned about, there are also additional deadlines in the legal process.

2) Consult an attorney: Even if you plan to represent your Georgia corporation in a lawsuit, it is advisable to at least have an initial meeting with an attorney to discuss procedural issues and how to best represent your business. Also you need to determine if you can even legally represent your business as some courts in Georgia require a business to be represented by legal counsel. If your business falls into this category and you do not seek representation, the Plaintiff can seek immediate judgment against your business, which the court will likely grant.

In this case, a homeowner hired a contractor to perform some construction on his home. This work was governed by a written contract signed by the parties. The work was completed on or about July 23, 1999, at which time the homeowner paid the contractor. Within a year, the homeowner began noticing problems, and over the course of the next 5 years, the contractor returned to perform repair work. Even after all of the repairs, the homeowner still noticed construction problems, and finally hired an engineer to inspect the construction in June 2007. The inspection revealed that there were deficiencies in the construction and the materials used, which prompted the homeowner to file suit in July 2007 for breach of contract – almost 8 years after the work was initially completed! Unfortunately for the home owner, he had waited too long to bring suit under the applicable statute of limitations, which resulted in dismissal of his lawsuit.

The important lesson to take from this case is that if you file suit for breach of a simple construction contract, you MUST make sure to do so within 6 years after work was substantially completed. Do NOT simply allow a contractor to make repairs, as the statute of limitations will not be adjusted to run from the most recent repair date. If only the homeowner in the Wilks case had ordered the inspection earlier, he could have filed suit prior to July 2005, thus ensuring that his case was heard.

In mediation, the parties employ a mediator, who is a third party neutral, to help them confidentially and cooperatively work toward a settlement. Typically, the parties will begin the process in the same room, where the mediator will explain how he or she operates. Then, the parties will each separately meet with the mediator and lay out their points of view and any possible resolutions. The mediator effectively guides the parties through the process and may assess each party’s position and point out how the dispute would likely play out in a court of law. During mediation, the parties can have as much or as little direct contact as they desire, which is sometimes to key to resolving disputes where there is bad blood between the parties.

The Georgia court system recognizes that mediation is a valuable tool in alternative dispute resolution, and many counties provide mediation and alternative dispute resolution information and resources on their court websites:

Superior Court Mediation in Cobb County, Georgia
Superior Court Dispute Resolution Center in DeKalb County, Georgia
Office of Alternative Dispute Resolution in Fulton County, Georgia
Alternative Dispute Resolution in Forsyth County, Georgia
Mediation and Alternative Dispute Resolution in Gwinnett County, Georgia

If you have questions about the mediation process or other methods of alternative dispute resolution, make sure to contact an experienced attorney.

It is important to note that some Georgia corporations do not need to keep corporate records. In order to avoid recordkeeping, Georgia corporations must identify themselves as statutorily close corporations by claiming the appropriate code section (O.C.G.A. §14-2-902) on the articles of incorporation filed with the Georgia Secretary of State. Corporations that are eligible for this election typically include small, family-owned corporations and ‘mom and pop’ businesses. However, prior to making the election, please contact an experienced Georgia business attorney to ensure that your business qualifies and that you properly make the election.

Superior Court: This court has exclusive jurisdiction to hear all civil business disputes concerning any amount of money between citizens of Georgia (1) where the party filing suit wants to force another party to act (affirmative equitable relief) and (2) where parties seek a determination as to ownership of land. Aside from these cases, superior courts can hear almost any other civil case, except those with certain specialized subject matter.

State Court: This court can hear almost all civil business cases between citizens of Georgia with the exception of cases where the superior court has exclusive jurisdiction or cases concerning specialized subject matter.

Magistrate Court: This court can hear any case between citizens of Georgia that State Courts can hear so long as the dispute is for less than $15,000.

In order to qualify for the Fulton County Business Court, Rule 1004 of the Business Case Division specifies that the case must be filed in the Fulton County Superior Court, involve a lawsuit where more than $1,000,000 must be in dispute. Rule 1004 specifies additional criteria that the lawsuit must have, including a claim Fulton County Business Court determines should allow it to take jurisdiction of the case, or a claim that falls under one of the following portions of the Official Code of Georgia:

• Georgia Securities Act of 1973;
• Uniform Commercial Code;
• Georgia Business Corporation Code;
• Uniform Partnership Act;
• Uniform Limited Partnership Act;
• Georgia Revised Limited Partnership Act; or
• Georgia Limited Liability Company Act.

Other types of cases may be heard by the Fulton County Business Court only with the express consent of all parties.

Arbitration, though very similar to the court system, can provide parties involved in business disputes with some unique advantages. First, it is the parties who dictate how they want the arbitration to proceed by designing their own timelines. Unlike in the Georgia court system, where it typically takes at least a year (or sometimes much longer) for a case to proceed to trial, the parties to an arbitration can schedule a final arbitration hearing within a few months after initiating the arbitration process. This is why many business contracts specify that arbitration is the required form of dispute resolution if a conflict arises. The caveat to this faster resolution is that unlike the court system – which is funded by taxpayer dollars and where parties need only pay nominal filing fees – arbitration associations are typically private business enterprises that require the parties to pay for the time of the arbitrator, who typically bills at a rate of several hundred dollars per hour.

Another advantage to arbitration is that the parties can select an arbitrator who has specialized training or experience in a technical or specialized area of the law. This is in marked contrast to the court system where judges, though generally knowledgeable on the law, may not have any pertinent experience related to a complex business matter, such as construction, intellectual property or employment. When parties use the court system, it is also important to note that they have no say in which judge is ultimately appointed to oversee their cases, while in arbitration, the parties typically collaborate in choosing a specific arbitrator.

Superior Court: This court has exclusive jurisdiction to hear all civil business disputes concerning any amount of money between citizens of Georgia (1) where the party filing suit wants to force another party to act (affirmative equitable relief) and (2) where parties seek a determination as to ownership of land. Aside from these cases, superior courts can hear almost any other civil case, except those with certain specialized subject matter.

State Court: This court can hear almost all civil business cases between citizens of Georgia with the exception of cases where the superior court has exclusive jurisdiction or cases concerning specialized subject matter.

It is important to note that some Georgia corporations do not need to keep corporate records. In order to avoid recordkeeping, Georgia corporations must identify themselves as statutorily close corporations by claiming the appropriate code section (O.C.G.A. §14-2-902) on the articles of incorporation filed with the Georgia Secretary of State. Corporations that are eligible for this election typically include small, family-owned corporations and ‘mom and pop’ businesses. However, prior to making the election, please contact an experienced Georgia business attorney to ensure that your business qualifies and that you properly make the election.